Last weekend a new trader wrote on the blog asking how much time he needs to dedicate to learning the components of trading. It seemed to me that he was gently expressing a little frustration over what seems to be the daunting amount of knowledge needed. Often in such circumstances (though not apparent in the blogger's contribution) there is an element of impatience and desire to move forward and make money. The problem, of course, is that jumping in also exposes the traders to the quite real risk of losing money.

First, I really want to congratulate the blogger for accepting that the learning needs to come first. Far too many neophytes just enter the fray with a ready, fire, aim approach and then learn some very expensive lessons. Those who continue on already may have paid a heavy price in losses for their education and still need to get personal coaching or attend seminars or watch DVDs or read books. One way or the other the education can be time consuming and expensive. It is even more expensive if the trader begins his career without education. No one would think they could be a surgeon or a truck driver or a baseball player without first learning to operate or learning to drive or learning in which direction to run the bases yet every day people begin trading without any trading education.

In any event, part of my response to the blogger was as follows: "It is impossible for me to answer how much time you need to dedicate to learning about the markets other than to say something like: as much as it takes. When we begin learning trading, the information can seem overwhelming. Part of the difficulty comes from learning a new language. Options, futures, puts, calls, FX along with a myriad of other words are foreign at first, but as we gain knowledge they become second nature. I would suggest you learn at the pace that is comfortable for you understanding that you may become a little impatient to put some money on the line. There is no need to yield to the impatience. Learn first, then paper trade, and if successful with your paper trades, gradually put money at risk in small positions. I would suggest you first study trading stock or ETFs (Exchange Traded Funds) and then perhaps add some knowledge about options like covered calls and protective puts. You may never trade futures so that might come later in your study. When you write that you want to engage in short term trading, I would add a caution that it might be better to let the stock decide when you get in and when you get out rather than trying to pre-determine how long you will be in a given position."

As I wrote to the blogger, the first hurdle, and it is a big one, is new vocabulary. Just what is a call and what can you do with it? How can puts help my trading? What is a butterfly (not the one that flies around the garden) or an iron condor or a vertical spread? I remember the first several weeks studying the Russian language in college and later had similar feelings when I began to study trading. In both cases I felt like I'd just never get it but with study and repetition I began to grasp and retain the meaning of words and concepts. I believe that one must learn and understand the basics before moving to the next level in trading or almost anything else. The basics provide the foundation without which the more complex cannot be truly grasped and understood.

Trading a stock is one of the most basic things we do in the market, but it can also be one of the riskiest things we do. If we buy a stock, we risk the total cost of the stock. If we sell a stock short, we have theoretically unlimited risk. We may never trade an option and not care anything about them if we just trade stock so the new trader may have no interest in learning about options. However, once that new trader learns that there is a way to "insure" a stock position with options or that he may use options on stock he owns to create a regular income stream, he may decide that it is worthwhile to learn at least something about options. After that, he may find that he wants to use options to buy stock he likes at wholesale or he may want to set up limited risk trades with relatively high potential returns using options. All of these things may come in time and I have written at length in "Trade Your Way to Wealth" about a number of these strategies as well as including the definitions.

Last weekend I wrote about the pace of trading. Here we are talking about the pace of learning and each of us learns at our own pace and in our own way. My advice is to study at a pace that is within your personal comfort zone and in a way that is most efficient for you. That may be by reading or by hiring a successful trader as a coach or, perhaps, by watching DVDs. I recommend you choose the method that is most enjoyable for you and incorporate the learning in a regular time slot that permits you to devote as much concentrated, uninterrupted, and focused energy as your personal schedule permits.

For those who are visual learners, I do have available a 5 DVD set of a complete professionally recorded two day basic trading seminar I put on entitled SWAT (Stockmarket Weapons and Tactics). If interested the price is $199 and you can contact me through MarketFN.com. The DVDs start with basics and build from there to include about 13 strategies including both stock and option trading.

Good Trading!
Bill Kraft

Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with real-time alerts intended to provide you with the opportunity to make many, many profitable trades.

Here is a play from the Success Trading Group:

MDU Resources Group Inc. (MDU)
Our Success Trading Group members closed two winning trades this week when we closed out a position in AT&T, Inc. (Ticker: T) and MDU Resources Group (Ticker: MDU). We have several stocks on our radar and are looking forward to trading next week.

Have a great weekend and we'll trade next week.
Success Trading Group Team

Our Option Trading Service is for conservative traders that understand leverage principles and enjoy the challenge of options trading. We focus on powerful option trading strategies that place volatility and momentum in your favor. And we pride ourselves on always minimizing our losses!

The Option Trader service utilizes standard trading in Puts and Calls as well as strategies using Leaps, Straddles, Credit Spreads, Calendar Spreads, and Naked Puts. But no matter how sophisticated a strategy may be, we ALWAYS know our downside potential on every trade.

Here's a look at a trade Bill is currently working on:

SAIC, Inc. (SAI)
Having recently come off a double bottom SAI has now reached an area of old support that could now be considered a new resistance. If the share price can break through that resistance, I would consider putting on a synthetic long position where I would sell naked at or out of the money puts and buy calls with the same expiration and strike. The risk graph in such situations simulates the risk graph of stock ownership.

Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
"Trade Your Way to Wealth" by Bill Kraft is an Amazon.com best seller!
"Smart Investors Money Machine" is Bill Kraft's most recent publication.
"Trading for Keeps: Making Money with Low Risk Option Trades" a trading DVD by Bill Kraft